As the value of your home increases over time, a cash-out refinancing allows you to tap into the equity you have built with a new mortgage; one that pays off the balance on your existing loan and puts the rest in your pocket.

When considering a cash-out option you need to weigh the benefit of what you are going to use the money for against the time it will take to pay back. Some questions to bear in mind:

What are the interest rates? A good rule of thumb for a cash out refinance is to get an interest rate that is less than or equal to your current interest rate. If this is not the case, a home equity loan could be your best bet.

How much cash do you need? If you need a large sum of money, a new first mortgage might be a better option. The first mortgage will give you a lower interest rate and longer repayment period.

What is the monthly payment? Make sure your budget will allow for the new payment.

What is the effect on your taxes? Mortgage interest is almost always tax deductible. The potential tax credit will be more effective than other types of loans (i.e. credit card, store loan, unsecured bank loan).

What is the total cost of borrowing? Review the good faith estimate which will outline all fees associated with the loan (i.e. appraisal, title, etc.)

What is your break even point? Look at your whole financial picture. If it is going to take 24 months to break even and you plan on moving in the next year, this will not be a smart investment. Our Ross Mortgage loan officers will help you determine what makes the most sense to insure that you protect your current and future investments.